Shipping laws leave much to whine about
The Carroll County Times posted the article below about this year's direct wine shipping bill and Maryland’s three-tier system:
Shipping laws leave much to whine about |
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| By Carrie Ann Knauer, Times Staff Writer |
Sunday, January 31, 2010 |
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Marc
Austin said he has done a little browsing on a wine Web site, hoping to
score some bottles that weren’t at his normal liquor store and search
for deals.
But once
he typed into the Web site that he lived in Woodbine he was quickly
informed that it is a felony to ship wine directly to consumers in
Maryland — one of just a handful of states with such a policy.
Austin
said he gave up on the quest for those bottles and instead is waiting
to see the laws changed in Maryland so he and other wine drinkers and
Maryland wineries will benefit from more open commerce.
“It
takes away opportunities to drink wines from all over the country,”
Austin said of the current law. “Interest [in wine] is up. There’s a
market there that wasn’t before.”
Thirty-seven states in the
country have laws that allow consumers to purchase wine online or from
a winery and have it shipped directly to them, but Maryland has
continued to hold out.
For almost three decades, small groups
have been lobbying the Maryland General Assembly to change the law so
that wine drinkers could gain access to the estimated 85 percent of
domestic wines not carried by wholesalers in the state.
Maryland
wineries have testified that lifting the ban on interstate shipping
would also give them the freedom to increase sales outside of the
state, and even be able to serve patrons within the state who may have
tried a bottle on a visit or at a restaurant and want to purchase more
— without the drive.
Most years, a handful of consumers would
come to the hearing to speak in favor of the bill, with the rest of the
room filled with liquor store owners and representatives from
wholesalers, speaking against the issue.
For supporters, the
bill is an issue of freedom of choice and flexibility granted to most
other Americans. But opponents say it’s merely an attempt to overturn
the state’s whole system of alcohol distribution — one that was set up
to prevent monopolies of alcohol distribution in the state and prevent
minors and those who are intoxicated from purchasing alcohol.
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The bill will return to Annapolis this session, and the proponents, who
have been working hard to organize and unite supporters, are hoping
that this will be the year when direct-to-consumer shipping will
finally be passed.
Maryland’s three-tier system
Since
Prohibition ended in 1933, Maryland has used a three-tier system of
alcohol distribution that requires all materials to go from a
manufacturer to a wholesaler that distributes it to a retailer before
reaching a consumer.
One of the few exceptions to the three-tier
system is for “farm wineries,” which may sell their own products at
their location and directly to retailers, a right accorded to them in
2006. At the same time, restaurants and retailers were also granted the
ability to start purchasing wine directly from out-of-state wineries
rather than using wholesalers. ??
The three-tier system works
well enough for wineries that sell to retailers within their own state
but makes it difficult for them to get a larger following outside of
their local area. Small wineries, lacking the funds to do much
marketing, aren’t attractive to wholesalers, and their wines don’t make
it to retailers in Maryland or to consumers.
According to
Marylanders for Better Beer & Wine Laws, 85 percent of domestic
wines aren’t available in Maryland because of the existing alcohol
distribution and permitting system.
For most wine drinkers, the
15 percent that is available is more than enough variety, but at times,
even the casual wine drinker could come across problems.
If
Maryland residents were to travel and find a winery they would like to
buy a case from, but can’t take it with them at the time, the winery
wouldn’t be able to ship the wine directly to the traveler’s home
address. Marylanders can’t join “Wine of the Month” clubs that are
shipped via the mail, either, and technically aren’t allowed to drive
back into Maryland with more than a quart of wine with them at a time.
The direct wine seller’s permit
In
the past decade, the state introduced a Direct Wine Seller’s permit,
which was designed to allow consumers to purchase wine directly from a
winery. However, the process requires the out-of-state winery to apply
to the state to get the Direct Wine Seller’s permit, find a wholesaler
in the state to agree to be the mediator and sign off on the
application, and get the consumer’s chosen retailer to agree to accept
the package.
Jeff Kelly, director of the field enforcement
division of the comptroller’s office, said only a few wineries have
applied for this permit, and he believes three wholesalers have agreed
to be the mediators.
“It’s a system that could work, but it’s not used a whole lot,” Kelly said.
Kelly
said he believes the system isn’t used more because it is
misunderstood. Many Web sites list Maryland as being a felony state
when it comes to shipping alcohol, he said, and while that is partly
true, it prevents businesses and consumers from learning how to legally
achieve their desired transactions.
“There is a mechanism. If
you truly found a wine you absolutely love, there is a mechanism to get
it here, and that mechanism is working,” Kelly said. “Whether or not
this process could be improved, I suspect it could be improved, and
maybe with the electronic age it could be even better still. But there
is a process, there is a system that allows people to get [wines] into
Maryland.”
Adam Borden, executive director of Marylanders for
Better Beer & Wine Laws, said the process is legitimately
confusing, which is why no one wants to get involved with it.
“To
say that the Direct Wine Seller’s permit is an abject failure is
probably the understatement of the year,” Borden said. “You don’t go
through that process for any other type of good.”
Borden said he
learned through a Public Information Act request of the comptroller’s
office that since the Direct Wine Seller’s permit was enacted, the
state collected $150 from excise tax and permits — the equivalent of
about 66 cases of wine. New Hampshire, on the other hand, collected
more than $500,000 in one year from tax on direct shipping of wine, he
said, showing what the potential could be in a program that allows
consumers more access.
Creating a new shipper’s license
While
there has been discussion on streamlining the Direct Wine Seller’s
permit process, Borden said his organization is supporting a bill that
would get rid of it and replace it with a “Direct Wine Shipper’s
License.”
The license would allow a winery or retailer to ship
directly to a consumer, using a shipper such as UPS or FedEx, requiring
a box to be labeled as having alcohol and requiring the carrier to
check ID and get a signature from the recipient, who must be 21 years
of age or older.
“It’s been seven years, and still hasn’t
worked, plus the fact that it is not in alignment with other states,”
Borden said. “I just don’t see the need to spend any more time on it —
it’s clear that it needs to be scrapped and rewritten, and that’s what
we’re proposing.”
Reach staff writer Carrie Ann Knauer at 410-857-7874 or carrie.knauer@carrollcountytimes.com.
How out-of-state wines arrive in Maryland
There are currently three types of permits that allow wineries to sell wine from out of state in Maryland.
Permit No. 1
The
Non-Resident Dealer permit is typically used for wineries to sell to
Maryland wholesalers, costs $100 annually and is held by about 1,100
entities.
Permit No. 2
The Non-Resident Winery
permit allows direct shipping to retailers but is not widely used
because retailers are not accustomed to ordering direct — a process
that entails more paperwork and calculating a higher mark-up. The
permit also costs $100 annually and is held by about 50 entities.
Permit No. 3
With
the Direct Wine Seller’s permit, the winery and consumer have to find a
wholesaler and retailer in the state that meets the Alcohol and Tobacco
Tax Division’s requirements and be willing to take part in a deal that
has little incentive for them.
Step 1: The winery applies for
the Direct Wine Seller’s Permit, which is $10 annually, and designates
a cooperating wholesaler to facilitate the delivery to a licensed
retailer. The winery may only choose one wholesaler in the state, and
get their signature on the application form before submitting it to the
state.
Step 2: The wholesaler must assure delivery of the
product from the winery is made only by a licensed public
transportation permit holder. In its paperwork, the wholesaler must
file its monthly tax return with a detailed summary of all shipments
facilitated on behalf of the Direct Wine Seller permit holder.
The
wholesaler must make the delivery of the wine to the licensed retailer
on the next delivery date after receiving the shipment. For their
services, the wholesalers can impose a service charge, to be paid by
the consumer, for $2 per bottle, but not more than $4 per shipment.
Step
3: The retailer, who must check ID to confirm that the wine purchaser
is 21 years of age or older, can impose a service charge to the
consumer of $5 per bottle, but not more than $10 per shipment.
The Maryland Comptroller’s office said that most wholesalers and retailers are not imposing the extra fees.
Source: Maryland Comptroller’s office and Marylanders for Better Beer & Wine Laws